Mortgage rates jump to 10-month high

Mortgage rates continued their miserable rising streak this week. They have gone up half a percentage point since early October.

The rapid spike in interest rates could force some homebuyers to adjust their expectations: They might have to look at less-expensive houses than they were considering just before the election. And some homeowners have lost their incentive to refinance. For others, there’s an urgency to refinance now, in case rates rise even more.

Mortgage rates this week

The benchmark 30-year fixed-rate mortgage rose this week to 4.1 percent from 4.01 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 4.07 percent. Four weeks ago, the rate was 3.64 percent. This is the highest the 30-year fixed has been since Jan. 6.

The mortgages in this week’s survey had an average total of 0.22 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.78 percent. This week’s rate is 0.32 percentage points higher than the 52-week average.

■ The 15-year fixed-rate mortgage rose to an average 3.33 percent, from 3.21 percent.

■ The 5/1 adjustable-rate mortgage climbed to an average 3.44 percent from 3.39 percent.

■ The 30-year fixed-rate jumbo mortgage rose to an average 4.08 percent from 4.01 percent.

The 30-year fixed averaged 3.56 percent in Bankrate’s Oct. 4 survey. In the seven weeks since, it has gone up 0.54 of a percentage point. It went up slowly and steadily for a few weeks, then surged upward after the election.

“The reason interest rates are rising is there is an expectation of an economic stimulus with Donald Trump coming in,” says Lawrence Yun, chief economist for the National Association of Realtors. He explains that higher spending on infrastructure, plus tax cuts, could provide a short-term boost to the economy, with added jobs. Inflation could follow. Based on this string of suppositions, mortgage rates have risen.

How the rate increase affects you

The 30-year fixed has gone up eight weeks in a row, except for one week when it was unchanged. As recent as early October, people with good credit were getting 30-year mortgages at 3.5 percent. Those days are over. Now, 4 percent is the new 3.5 percent.

Interest rates skyrocketed after the election on the notion that a fiscal stimulus will bring inflation.

If you’re a typical homebuyer, you figure out how much you can spend each month on a house payment, and then you search for a house that costs as much as you can afford. A financial adviser might frown when you stretch your housing budget, but you’re just following human nature and pursuing the American dream.

Then interest rates rise like this, and you wake up and realize that you’re going to have to buy a less-expensive house than you wanted to, because the higher-mortgage rate pushes up the monthly payment.

“One of the first things that people have to take into account is that for 1 percent change in interest rate — it affects affordability by roughly 10 percent,” says Jim Sahnger, mortgage planner for Schaffer Mortgage, in Palm Beach Gardens, Florida. He says a lot of people are stretching to buy the maximum house they can afford. With this increase in rates, “it’s absolutely going to impact them,” he says.

Some nitty gritty numbers

For someone borrowing $200,000, here’s how rising mortgage rates affect monthly principal and interest payments:

■ 3.5 percent: $898.09

■ 4 percent: $954.83

■ 4.5 percent: $1,013.37

To put it another way, here’s how rising rates affect housing affordability. In this scenario, the borrower wants to pay $1,000 a month in principal and interest after buying a home with a 20 percent down payment.

Rising mortgage rates will affect refinancers more than they will affect homebuyers, says Rick Sharga, executive vice president of Ten-X. “It’s not really a question of whether people will buy houses,” he says. “It comes down to which house and how much house.”